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A Simple Millennials Investment Guide

October 29, 2017

Millennials often don’t appreciate yet the value of investing. One of the reasons might be because it’s difficult to understand the process and terms like fund type, holding period, risk classification, etc. However, investment isn’t really that complicated. As a millennial on her mid 20s, I’m delighted to share a simple investment guide to my fellow millennials that I’ve gathered based on my research and own experiences.

There are many investment options but I only picked six that I believe would be more easy to understand and workable for millennials like me.

High-yield Savings account

Are you a risk-taker or not? If you’re hesitant to answer yet, then you should start with this first. High-yield savings account is a combination of savings account and time deposit account. The initial deposit, maintaining balance, as well as the interest rate is higher than savings accounts but lower than time deposits. Don’t worry because you can still withdraw your money anytime but only within the allowed number of withdrawals per month to earn an interest.

How to get started:

Choose carefully the bank which offers the highest interest rate and study the required number of withdrawals per month to align with his spending.

Mutual Fund and Unit Investment Trust Fund

Once you’re ready to take the risk, you can start with mutual funds and unit invest trust fund (UTIF).

Mutual funds are a type of investment wherein you join other investors to form a massive fund that will be invested in various securities depending on the investment objective of the fund. The pool of funds is handled by an expert called fund manager. The mutual fund company issues the investor a certain number of shares based on your amount of investment.

Profit from mutual funds are based on the NAVPS (Net Asset Value per Share) from the time you open an account to the time you close the account or redeem your money. The higher the investment and the longer it is invested, the higher the return or profit.

On the other hand, UITF is sold by banks. You purchase units of participation in the fund, whose value is called the Net Asset Value per Unit (NAVPU). This reflects the current market prices of the instruments that make up the UITF. The NAVPU rises or falls depending on the movement of market prices. Since UITFs are sold and managed by commercial banks, these are supervised by the Bangko Sentral ng Pilipinas.

How to get started:

You must first identify what type of investor you are–conservative, moderate, or aggressive. Then decide what type of mutual fund or UTIF best suits your preference. A minimum investment amount of Php 5,000.00 (for mutual funds) to Php 10,000 (for UTIF) is required to open an account.

Personal tip: I also started with this this investment type because I believe it’s convenient. Why? There are professional fund managers so I don’t need anymore to think which shares to specifically invest. My first investment was last April 2016 in a UITF . I invested Php 10,0000 BDO Equity Fund and currently, I have a paper income of Php 1,700+ (paper because I haven’t withdrawn it yet. I’ll try to share further my UITF investment experience in my next posts). Me and my boyfriend also have a Sunlife Mutual Fund wherein the initial investment fund is only Php 5,000.00. What’s good with Sunlife’s Mutual Fund is you only need a minimum of Php 1,000.00 to regularly invest on your account.

Variable Life Insurance

I hope you didn’t raise an eye when you see the word insurance. Yes, I consider an insurance a great investment option and I’m proud to have one. Unlike the traditional insurance which majority of the older generation are familiar with, this variable life insurance provides you a life coverage and at the same time grow your money. This means, you get to enjoy your money and use it for your personal/family needs even before you leave your loved ones.

How to get started:

Ask financial advisers of insurance companies for their Variable Life Insurance plans. Decide the amount of life coverage you want to have when you retire to determine your monthly or annual premium. Part of your premium will be allocated to your investment fund value on will grow depending on the fund type and numbers of years you’ll invest.

Personal Tip: Your monthly/premium must be realistic, meaning, you can and will actually pay it. Last year, by the age of 25, I started with a Sunlife’s FlexiLink first with a an annual of Php 12,000.00 or a minimum of Php 1,000.00, payable in 10 years with a coverage of Php 500,000.00. Yes, it’s quite small but it’s a good start, right? Based on historical investment performance, when I reached the age of 40, my fund value would have more than Php 200,000 (based on 10% interest).

STOCK MARKET

(This is my next target) Stocks maybe the most complicated investment type but may provide the highest-yielding amount once you’ve done it right. So how does this really works?

Stocks are shares of ownership in a corporation. When you purchase stocks of a publicly listed company, you become a stockholder or shareholder of that company. Being a shareholder automatically means becoming a part-owner of the company. The bigger the stock, the more you can participate in the company’s growth and future profits. Earnings predominantly depend on the company’s performance, as well as the trends of the stock market.

Before taking the risk, you need to understand clearly the in’s and out’s of stock market. Why? Because with this investment type, you’re on your own. You don’t have pool managers. Though you have stockbrokers, you will be the one to decide which stocks to buy and when to sell them. Diligence, extensive research and discipline are highly needed with this one.

How to get started:

You need at least a minimum investment amount of Php 5,000.00 to open a trading account. In order to buy stocks, you need to register an account with licensed stockbrokers. There are over 100 licensed stockbrokers. You can either placed your order traditionally via phone call or digitally through online. Among the list of online stockbrokers accredited by the Philippine Stock Exchange are: AB Capital Securities Inc., Abacus Securities Corp., Accord Capital Equities Corp., Angping & Associates Securities Inc., BPI Securities Corp., COL Financial Group Inc., Yap Securities Inc., First Metro Securities Brokerage Corporation, RCBC Securities Inc. and Wealth Securities, Inc.

BUSINESS

You can start with a simple business like selling food, ready-to-wear clothes, etc. which only need a minimum capital. I remember the story of a couple who started with just Php 20.00 capital for their ice candy business but now they’re earning millions.

If you’re hesitant to start with your own concept, franchising is the best investment option to consider. As the popular adage in the franchising industry says “owning a franchise allows you to go into business for yourself, but not by yourself.” Aside from being a boss of one’s business, investing in a franchise business offers many advantages. A franchise business has a higher chance of success because it’s already an established product or service plus a tested business model. Moreover, a franchisor supports his franchisee from the opening until running the business.

How to get started:

Decide what type of business you want and how much capital you can spend. If you’re going to buy a franchise, make a list of franchise concepts you would like to consider. TUpon deciding the franchise concept, ask the franchisors the following: (a) franchisor’s support program; (b) total investment package (the franchise fee is just part of the total cost of the franchise); (c) return of investment; (d) number of outlets – both company-owned and franchised – and where these are located.

Personal Tip: A business is not only limited to tangible things only. You can take advantage of your talent and skills and begin a freelance career/business. As a writer, I’m currently doing freelance works for several clients and earns as much as Php 1,000.00 for a 500-article.

Yourself

Last but not the least, I believe the best investment is yourself. Investing in one’s self may be the most profitable investment a person will ever make. It yields not only future returns but also a current pay-off as well. Warren Buffet, the most successful investor considered in the 20th century, advised people to invest as much as possible in something that everyone has access to because it is their biggest asset by far.

Mplify Managing Director emphasized the importance of career advancement at his talk during the Pinoy Entrepreneurs Summit and noted to “Never settle for what skills you have.”

How to get started:

Investment in one’s self can start with education advancement. This can include going back to school and earning a Master’s / Doctorate degree or it can be as simple as attending trainings that will enhance your skills. Most importantly, a person must nurture his mind and take care of his health for him to fulfill his goals in life.

Some information on this article is based on my previous article in Balikbayan Magazine (December-January 2016 issue)